In the past decades several versions of the binomial model for option pricing, originallyintroduced by COX, ROSS, AND RUBINSTEIN, have been discussed in the financeliterature. Some of these approaches model an arbitrage-free market in the discrete setupwhereas others attain this property only in...

Three years after the seminal work of Black and Scholes [3] on the pricing of European options,Scholes [18] presented a paper in which the impact of taxation on the value of an option is analyzed.We restart this discussion in a simple binomial setting emphasizing the economic principlesof...

The binomial model has been used to price a wide variety of equity and interest rateoptions for more than two decades. Originally developed by Cox, Ross, and Rubinsteinto clarify the basic pricing principle of its continuous-time counterpart with reduced mathematicalrequirements, the approach...